This part of my strategy is mildly controversial and not yet totally proven, but it’s working for me and it’s a whole lot of fun. I’m going to encourage you to risk only what you can afford and give it a try. Our 401K, 403Bs and IRAs are tanking. We’ve literally lost 50% of our retirement/savings this past year. Seriously not fun because we have been very diligent during our working careers to save responsibly. I’m too afraid to try the stock market just yet, so when a friend suggested I investigate microloans, I decided to give it a try. First I put $25 on Kiva.org in a five-month loan. No problem, in five months, I get my money back and in the meantime, a nice lady in Central America is starting her clothing shop. No harm, no foul, and my interest-free investment is more secure than under my mattress or in my 401K. Thank you Kiva. But then I wondered if it was possible to make interest on these investments. Turns out, there is. I joined Lending Club and invested $100 into four loans, to prime borrowers only. There’s a risk of default here, but I invested only in prime borrowers, and only $25 in each, so there’s a pretty good chance I’ll get paid back at least most of what I leant. Also, Lending Club has a reputation for really chasing down those who owe money. Most forms of microlending have very low default rates though and as I’ve learned more about these while blogging at Prosper Lending I’ve decided to go ahead and keep investing. So far, I’m making money every day on my “microinvestment” of $100. This month, I’ve made $.60, and I have monthly payments of $3.33 owed to me tomorrow. Not bad for doing nothing. It’s like being a landlord with less commitment and no midnight maintenance calls. If you’ve got a little cash you’d like to invest (or if you need to consolidate a higher interest loan into something lower-interest) you might want to give peer-to-peer lending a try as either a borrower or investor. I love how interactive it is—I got to choose who I was investing in. Other options include Microplace (international investing) and PertuityDirect (a mutual-fund version of peer-to-peer lending).
The bottom line: diversity in your investments is good right? I’m helping someone and earning 10.89% interest right now. Not too shabby.